Obama under pressure to lay out China strategy

Reuters News
Posted: Oct 25, 2011 12:17 PM
Obama under pressure to lay out China strategy

By Doug Palmer

WASHINGTON (Reuters) - U.S. lawmakers critical of China's trade policies will use a hearing on Tuesday to press the White House to lay out plans to confront Beijing, even as Republicans resist a bill to punish the world's second-largest economy for its currency policies.

With bipartisan concern about the loss of American jobs to China already an issue in the U.S. presidential campaign, the House Ways and Means Committee hearing gives lawmakers a chance to blow off steam at Beijing and to grill top Obama administration officials on what the White House is doing.

"I look forward to hearing the administration's plan for addressing China's persistent barriers to U.S. exports and investment and exploring what should be done to ensure American employers and workers are treated fairly," Committee Chairman Dave Camp said in a statement last week.

The hearing with U.S. Treasury Under Secretary Lael Brainard and Deputy U.S. Trade Representative Demetrios Marantis comes just two weeks after the Senate passed legislation to push China to let its currency rise in value.

Many U.S. lawmakers contend Beijing keeps its yuan weak to gain an advantage in international markets.

But with House Speaker John Boehner refusing to schedule a vote on that legislation for fear it could start a trade war, Camp plans a broader inquiry into a host of Chinese policies believed to hurt U.S. exports and sales.

In addition to questioning Brainard and Marantis on the yuan's value, the panel will dig into issues such as China's subsidies to state-owned enterprises, forced technology transfers, discriminatory government regulation, poor enforcement of U.S. copyrights and patents and a multitude of other barriers to U.S. exports and investment.


The rapidly approaching tenth anniversary of China's entry into the World Trade Organization on December 11 also has focused attention on how much the world has changed over the past decade in Beijing's favor.

China, relying primarily on export-led growth, vaulted over Japan to become the world's second-biggest economy, while the United States fought two wars, racked up huge budget deficits and endured a brutal recession that left it with an unemployment rate stuck above 9 percent.

The U.S. trade gap with China more than tripled from $83.1 billion in 2001 to a record $273.1 billion in 2010 and is on track to set another new record in 2011.

Camp has been careful not to promise Tuesday's hearing would lead to legislation, but House Democrats say they intend to keep pushing and note that Republican presidential hopeful Mitt Romney has promised to declare Beijing a currency manipulator on his first day in office.

The former Massachusetts governor also has said he would direct the Commerce Department to impose countervailing duties on imports from China to offset the price advantage of the nation's undervalued exchange rate.

The Senate's bill would do essentially the same thing and so would similar legislation in the House of Representatives that Republican leaders have blocked from a vote, even though more than a majority of members support it.

Many U.S. lawmakers contend China's currency is undervalued

from 15 percent to 40 percent.


Still, U.S. companies that do business in China rate other issues as much bigger challenges.

Members of the U.S.-China Business Council on Monday ranked China's exchange rate policies 26th on their list of concerns, far below problems the companies face in China recruiting and retaining employees, obtaining licenses needed to do business, and coping with rising costs for labor and materials and rising competition from Chinese companies.

But for U.S. steel and other manufacturers that compete in the U.S. market against lower-priced imports from China, addressing the currency is the top priority.

"The view on this side is that we are in a trade war already and we're losing because of permitting this unbalanced current relationship to continue," said Tom Gibson, president of the American Iron and Steel Institute.

Despite such appeals, analysts said they doubted the Republican-controlled House would pass a China currency bill.

"Will the Republicans actually do very much? No, I don't believe they will," said Michael Colopy, co-founder and principal at International Commerce Consultants Inc.

Meanwhile, the White House has already ramped up its criticism of China, with President Barack Obama accusing Beijing of "gaming" the international trade system and U.S. trade officials turning up the heat on Chinese practices they say unfairly discriminates against foreign suppliers.

In Geneva on Monday, U.S. trade officials took Beijing to task for either "the inability or lack of political will in China" to stop widespread piracy and counterfeiting of U.S. software, music, movie, books and other products including apparel, athletics footwear, textile fabrics and floor coverings, consumer goods, chemicals, electrical equipment, industrial products and clean energy products.

(Additional reporting by Paul Eckert; editing by Philip Barbara)